Budget deficit? If anything, paying interest on the debt reduces the surplus. And in effect, paying interest to the private market is equivalent to increasing money supply. (getting confusing enough for ya yet? It is for me... :0)
The problem is not in having a public national debt, but in how it is spent. If we didn't have public debt, there would be no school bond offers and schools would have to be built on the current budget, with requisite increase in short-term taxes.
No... public debt in moderation is not an issue if it is spent on national infrastructure that will yield, or maintain, economic prosperity.
So what must be done is to either require that a Federal debt must have a quantifiable economic benefit, and not be taken on to fund entitlements. Essentially, a balanced budget proposal.
And btw, knocking the "hell" out of the government bond markets would knock the hell out of the US dollar. People across the world rely on a certain amount of US treasury debt to be available as a safe haven. Destroy that safe haven and they will resort to the next step, which may be precious metals.
And a return to the gold standard as measure of safety would cause more economic damage than any public debt you're concerned about.
So maybe if the cost of having a strong US dollar, with consequent low inflation, is to have a public debt market that the world looks to for safety, it might be worthwhile, AND JUSTIFIABLE, after all to have a couple of trillion in public securities constantly available.
Regards,
Ron |
